Personal Residence Converted

[S T]

Personal Residence Converted to Rental 7/15/07.

What is the best way to treat the following expenses on the converted Personal Residence. Actually been shown as a second home last 2 years deducting only allowable mortgage interest and property taxes.

(Sorry) Added date: Following were completed during 5/07- 6/07 - active lease on 7/15/07

Paint - $7,000 (Inside/Out)
Wash Outside $ 500 ( I would think would go with paint)
Garage Upgrades/Repairs $ 750 (Paint and clean, some shelving)
Landscape $7,500 (Plants and some hardscape)
Install Ceiling Fans $477
Plumbing $813 (replace faucets)
Install and Replace A/C $5,100 ( I guess 27.5 years)
Carpet $4,300 - 5 years
Fence $4,000 - 15 years
Flooring $500 - 5 Years
Water Heater $980 - 5 years or is it 7 years?
Window Coverings $ 3200 - 5 years
Roof - $890 (Repairs not replacement) Expense?
Dishwasher $ 629 - 5 years

Thoughts would be appreciated. This return has a lot of refinances and monies going all directions , (the tracing rules are really giving me a challenge)several rentals, a vacation home, and schedule c so I am leaning to the conservative side on everything, and I think my mind is a muddle, about now.

Sandy

[OtisMozzetti]

Rental expenses start when it's available for rental

Rental expenses start when the real estate is put in service, i.e. when it became available for rental by a tenant. The chronology is unclear, when it ceased to be a residence, when the repair and improvement work was incurred or paid, and when the real estate became available for rental.

[S T]

Yes

I forgot the dates, sorry, thought about it and corrected after you posted Otis

Sandy

[geekgirldany]

It sounds like to me they took a month to get it ready to rent and what information you have next to each expense is correct. The roof would be an expense because it was repairs. I would think the landscaping would be deductible over so many years. I don't have TTB in front of me for that one. Isn't painting always a maintenance expense deductible in the year paid?

[Snaggletooth]

Allocate to Residency?

Sandy, I would probably maximize these expenses, but I'm wondering if an auditor would view some of these as attributable to the period of residency rather than the period of rental. Only "rental" expenses would be allowed.

Examples of repairs which identify more with the period of residency than to the future rental use might be the following:

Paint - $7,000 (Inside/Out)
Plumbing $813 (replace faucets)
Roof - $890 (Repairs not replacement) Expense?

All of the above are more than likely the result of residential deterioration than prospective costs of forthcoming rental era.

Give yourself a break on the HVAC equipment. I believe this to be legitimate 15 year property at worst. If a heat pump is being bought, there's no possible way it can be expected to last 20 years nowadays -- in fact, the warranties on same are only 1-2 years.

I believe appliances to be 7-year property. No cite - but simply haven't seen anything to change from default of general equipment.

The water heater is very expensive - sounds like perhaps it is of the new vintage that heats the pipe directly instead of maintaining heat in an internal chamber. Check it out as to whether it qualifies for the residential energy credit, and if so, reduce the depreciable basis by the amount of the credit.

Good luck -

[DonPriebe]

All investment

Considering the short time frame and the extensiveness of the work done, this looks like a major renovation project to get the property in shape for rental use. As such all expenditures are classified as investment. (Pub 527, p3)

I believe appliances to be 7-year property. No cite - but simply haven't seen anything to change from default of general equipment.

Five years is correct. This changed several years ago. (Pub 527, p10)

[S T]

Capitalize

Thanks Don,

That was what I was looking for. Capitalize and begin depreciation on rental in service date.

Sandy